Quick Facts

Burundi’s economic freedom score is 53.7, making its economy the 132nd freest in the 2015 Index. Its overall score is 2.3 points better than last year, reflecting improvements in six of the 10 economic freedoms including the management of government spending, labor freedom, and freedom from corruption. Burundi is ranked 27th out of 46 countries in the Sub-Saharan Africa region, and its score is worse than the world average.

Over the past five years, economic freedom in Burundi has advanced by 4.1 points. Business freedom, control of government spending, and investment freedom have improved by 5.0 points or more. This year, Burundi has achieved its highest economic freedom score ever, registering the seventh-biggest improvement in the 2015 Index.

Despite these improvements, Burundi remains in the ranks of the “mostly unfree.” The lack of capable public institutions and the weak rule of law continue to undermine the implementation of other critical reforms. Tariff and non-tariff barriers, coupled with burdensome investment regulations, still hamper development of a more dynamic private sector and interfere with diversification of the economic base.

Background

The 1993 assassination of Hutu President Melchior Ndadaye sparked a civil war between Hutus and Tutsis that also significantly influenced the Hutu-led 1994 Rwandan genocide. Negotiations mediated by South Africa led to a power-sharing government in 2001. Pierre Nkurunziza, elected president by the National Assembly under a new constitution in 2005, was re-elected in 2010 in a disputed vote. His regime’s repressive policies and attacks on the opposition and media have led to fears of renewed violence. Burundi is active in the African Union’s AMISOM peacekeeping mission in Somalia and deployed troops to the Central African Republic as part of an international effort to prevent civil war in 2014. The economy is dominated by subsistence agriculture, and half of the population lives below the poverty line. Corruption is endemic.

Land-locked Burundi is one of the world’s poorest nations and one of the most corrupt countries in sub-Saharan Africa. Government procurement is conducted nontransparently amid allegations of cronyism, and customs officials reportedly extort bribes. The judiciary is nominally independent, but judges are subject to undue political pressure. Private property is vulnerable to government expropriation and armed banditry.

Burundi’s top individual and corporate income tax rates are 35 percent. Other taxes, including a value-added tax, add to government revenue that equates to 14.1 percent of domestic output. Foreign assistance also helps to support government expenditures that equal about 35.9 percent of gross domestic product. Public debt equals 32 percent of the domestic economy.

Reform measures in recent years have streamlined the procedures for incorporating a business, but start-ups are discouraged by time-consuming licensing requirements. With the labor market relatively underdeveloped, the public sector accounts for most formal employment. The state subsidizes fuel, rations subsidized electricity, and influences other prices through state-owned enterprises and agriculture-support programs.

Burundi’s average tariff rate is 6.4 percent. Importers may face customs delays, and importing goods is expensive. Although the country is relatively open to foreign investment, corruption may be a problem. The underdeveloped financial sector remains dominated by banks that are plagued by nonperforming loans and inadequate capitalization. Much of the population relies on informal lending.